BUS 421 : Ch 11.docx

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 421
• Professor: Howard Trottier

Document Summary

3 main components of compensation plan: st incentives based on earnings or shares, lt stock options based on share price performance, mt awards based on mix of 1 and 2. Precision: reciprocal of variance of noice of measure, lower noise higher precision. Increase ni sensitivity: increase recognition lag with cv accounting and full disclosure: reduces precision. Share price: low precision due to economic factors like interest rate, poor indicator of mger performance, high sensitivity means it contains some info of mger effert. Bogey: level that must be reached before compensation awards kick in: helps limit risk.